NEW DELHI | MUMBAI: Mahindra & Mahindra, Toyota and Mercedes-Benz stare at a bleak Christmas and new year if the Supreme Court decides to ban registrations of diesel vehicles of more than two-litre capacity in Delhi. This could also put the seal on the decline of diesel vehicles — already, 12,000 of them worth Rs 1,000 crore are said to be sitting in the Capital’s dealership lots as customers suddenly don’t want them amid a wider crackdown on pollution. The Supreme Court came down heavily on big diesels.

“The rich can’t be allowed to buy luxury diesel cars and SUVs (sports utility vehicles) and pollute the air with adverse consequences on the health of the rest of the population,” the court said on Tuesday, indicating that a three-month bar on registrations may be imposed as it seeks drastic action to lower the dangerous levels of air pollution in the Capital.

If the court decides on a ban on Wednesday, the move could badly hit the makers of luxury cars and SUVs that have engine capacities of more than two litres, given that the Capital is the biggest auto market in India.

The move could also act as a cue for other jurisdictions seeking to do something about cleaner air, experts said. The bench of Chief Justice TS Thakur and Justices AK Sikri and R Banumathi firmed up the contours of the order but didn’t pass it as time ran out. It will do so on Wednesday, Thakur indicated. This comes on top of the National Green Tribunal’s December 11 order banning registration of all diesel vehicles in the Capital until January 6. Aside from this, the Delhi state government will only allow even-numbered cars on even dates and odd-numbered cars on odd dates during January 1-15 as it tests a plan to reduce vehicles on roads.

Going by the court’s statements on Tuesday, diesel cars that have already been registered can continue to ply. Light commercial vehicles may also be excluded from a ban as Solicitor General Ranjit Kumar said stopping them would hit supplies of essentials to the city. The move was opposed by the Automobile Traders Association of India through counsel Dushyant Dave and Dhruv Mehta. Dave said the court should first target VIPs who move in convoys. He cited data to say personal diesel cars only contributed to 1.86% of the total pollution in the city. CJI Thakur brushed his plea aside, saying that even VIP traffic would be curbed if needed. He criticised the association for being myopic when Mehta suggested a transition period to allow dealers to liquidate inventory. “In any case, all our vehicles are Euro IV compliant,” Mehta argued. “All you are thinking of is money, you have to make sacrifices. Here, people’s health is involved,” CJI Thakur said. “Sell it elsewhere.” Dave said no city in the world had banned diesel, prompting CJI Thakur to reply: “The most polluted city must ban.”

DELHI LARGEST MARKET

Delhi is the largest passenger vehicle market in India with a 7% share.

“Not only will such an order badly impact auto makers who are selling diesel products like M&M, Tata Motors and Toyota, it will also have an adverse effect on companies who have invested in diesel technology,” said Abdul Majeed, partner at PricewaterhouseCoopers. “Worst of all, it may set a precedent for a ban on the sale of diesel vehicles in other cities such as Mumbai, Bengaluru, Chennai, Kolkata and Ahmedabad.”

Mahindra & Mahindra will be among the worst-hit if such an order is passed by the top court. Its Bolero, Scorpio, Xylo and XUV500 are powered by diesel engines of more than two litres. Toyota’s Innova and Fortuner use 2.5-litre and three-litre diesel engines. Other vehicles that will be hit include Tata Safari, Tata Sumo, Chevrolet Tavera and Hyundai Santa Fe. “The luxury car market will also take a hit,” said Gaurav Vangaal, senior analyst, forecasting, light vehicles, IHS Automotive. “Most luxury sedans and SUVs come equipped with these engines.”

Delhi accounts for 18% of the 38,000 luxury cars sold annually in India. Of this, almost 80% are diesel vehicles but more than half are below two litres. Market leader Mercedes-Benz will be the worst affected, with its entire range having engines bigger than two litres. Audi and BMW won’t be as badly hit on that count.

“The court in a way allows Audi and BMW to sell cars, whereas mass models of Scorpio, Innova can’t be sold. We don’t understand the logic, we understand that this is just an observation. I am sure this will be challenged,” said an executive with a global car firm.

POPULARITY PEAKED IN 2012-13

The popularity of diesel vehicles rose to a peak in 2012-13, when they accounted for nearly half the passenger vehicles sold in India, owing to the price differential with petrol. Deregulation of the fuel and the narrowing of this gap have seen them become less coveted. Sugato Sen, deputy director-general of the Society of Indian Automobile Manufacturers (SIAM) lobby group, said passenger vehicles are being unfairly targeted.

“There is a perception today that cars, especially diesel cars, are polluting. But if you look at available data, the pollution on account of construction activities, road dust is much more substantial than emissions from diesel vehicles,” he said. “Diesel technology has improved a lot over the past few years and such a decision if taken and implemented will put a dampener on millions of dollars of investments made by companies to bring cleaner technology to consumers.”

Kaushik Madhavan, head of automotive and transportation at Frost & Sullivan, said the backlash is similar to the one seen in the US 25-30 years ago, when diesel was considered a dirty fuel. This will effectively ban the cleanest diesel vehicles that are BS IV (Bharat Stage IV) compliant, leaving older BS II and BS III vehicles untouched, he said.

“Such sudden changes will create confusion and uncertainty in the minds of buyers. There should be a comprehensive study on the sources of pollution,” said Jnaneswar Sen, senior vice-president, Honda Cars India. Honda was one of the companies that started making diesel-powered vehicles because of the demand for them.

ENVIRONMENT CESS MAY GO UP

The top court is also thinking of increasing the environment compensatory cess it imposed in October on all vehicles entering Delhi to avoid higher tolls on national highways. The levy could rise to Rs 1,400 from Rs 700 for two-axle vehicles and to Rs 3,800 from Rs 1,600 for those with three and more axles. This came after senior lawyer Harish Salve, who’s assisting the court as amicus curiae, said that the suspended particulate matter levels had dropped since the court imposed the charge. The only trucks exempted were those with supplies meant for Delhi.

The bench said that no single step would be enough to tackle pollution levels and that a multipronged strategy was needed. That would include getting taxi services such as Ola and Uber to switch to more environment-friendly compressed natural gas (CNG).

It also considered banning vehicles registered before 2005 from entering Delhi, the burning of municipal waste and paving the roadside to minimise dust. The Delhi state government, through its counsel Wasim Qadri, said it would start vacuum-cleaning Delhi’s streets by April 2016 and submitted a plan to phase out thermal power plants at Rajghat and Badarpur.

As for the Arvind Kejriwal government’s plans to allow odd-numbered cars on odd dates and evennumbered cars on even dates, CJI Thakur said: “Go ahead and do what you think needs to be done.” Also under consideration is strict enforcement of a rule that doesn’t allow any construction activity without cloth cover.